The Dodd-Frank financial reform act signed this month by President Obama was, in my reading, very unfriendly to the non-agency MBS market. Taken in its entirety, key provisions of the bill create significant and protracted uncertainty for issuers and investors, further delaying the much-anticipated revival of private-label MBS issuance.

There was no surprise that a risk-retention clause was contained in the package, as some form of the provision has been in virtually all proposals. However, many critical details have been left to regulatory bodies to define and implement over time. For example, the definition of "qualified residential mortgages" exempt from risk retention will be jointly defined in the future by a collection of regulators. In addition, both the SEC and the FDIC have proposed comprehensive sets of rules that include different provisions for risk retention; the bill calls for them to be reconciled within 270 days and implemented in another year. While this represents the "fast track" for regulators, issuers will contend with major uncertainty until next spring.

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